The Income Heritability Puzzle
By Arnold Kling
At GNXP, Herrick writes
let’s just go all the way to perfect heritability of IQ and perfect assortive mating on IQ. In other words, let’s see if “IQ clones” will be have enough similarity in wages to match the 0.4 intergenerational correlation of income.
Will the IQ clones have similar incomes? Not so much. (0.3^2)*1 still equals something small: 0.09. Less than 1/4 of the intergeneration correlation in income. Medium-sized potatoes, but we had to make a ton of ridiculous assumptions to get there.
This refers to work done several years ago by Bowled and Gintis. The puzzle is that income is fairly highly heritable, .4, while the link between IQ and income is less so, .27. That makes it very unlikely that IQ explains much of the heritability of income.
In my view, if there is a swindle in the original Bowles-Gintis paper, it is that they measure income in different ways. When they look at the effect of IQ on income, they look at studies that appear to measure one year of labor income. This is a highly volatile number, which means that much of the variation is unexplained.
On the other hand, when they look at the heritability of income, they seem to prefer multi-year measures of total income. This has lower variability.
My guess is that if you do it apples-to-apples, the amount of income variation you can explain by parental income is about the same as the amount than you can explain by IQ. That is, if you used one year’s labor earnings as the dependent variable, then IQ might explain 20 percent of the variation; and if you instead used parents’ income, you would explain about 20 percent of the variation. If you used both variables together, you might explain 25-30 percent of the variation.
Next, consider using a 5-year average of labor income as the dependent variable. My guess is that the explanatory percentages would be more like 40, 40, and 50-60 percent, respectively. Five-year averages smoothe a lot of the noise, so you can get better results.
Even if I am correct, the Bowles-Gintis point that there is a lot of income heritability that is not mediated by IQ still stands.
Note that the comments on Herrick’s blog post are very high caliber. Although some of them appear to be riddled with errors, it’s a lot better than your typical drive-by snarkfest.